Sensitivity of BLS economic projections to exogenous variables, (EXCERPT), Monthly Labor Review Online, December 1986

Sensitivity of BLS economic projections
to exogenous variables

Norman C. Saunders

The Bureau of Labor Statistics conducts a comprehensive program of aggregate and industry-level employment projections on a biennial basis.¹ Users of the projections should keep in mind that BLS (or others preparing similar projections) must make many assumptions regarding the behavior of factors which affect the future course of the U.S. economy. In addition, judgments are made about the response of the projections to these primary assumptions. In short, although projections preparation and the use of models in preparing the projections may appear precise and scientific, developing economic projections is very much an art filled with uncertainty.

The assumptions made by BLS cover a broad range, from those about which we may be reasonably certain to those which are not at all predictable. The role of the analyst in preparing projections is to exercise judgment with regard to reasonable expectations for the assumptions, particularly where alternate values may have significant impacts. That is, if a particular assumption is highly uncertain, yet has little impact on the outcome of the projections, it is important that the analysts make that known to the users. Conversely, if the projections are particularly sensitive to specific assumptions, more care must be taken in their preparation.

This article examines the assumptions which affect the aggregate economic projections and illustrates the degree of sensitivity of the projections to possible errors in those assumptions.

This excerpt is from an article published in the December 1986 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.

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Footnotes

1 The BLS projections are initially published in the Monthly Labor Review. The latest series of projections articles, appearing in the November 1985 Review, include: Betty W. Su, "The economic outlook to 1995: new assumptions and projections," pp. 3-16; Howard N Fullerton, Jr., "The 1995 labor force: BLS' latest projections," pp.17-25; Valerie A. Personick, "A second look at industry output and employment trends through 1995," pp. 26-41; and George T. Silvestri and John M. Lukasiewicz, "Occupational employment projections: the 1984-95 outlook," pp. 42-57.

2 A comprehensive methodological description, along with reprints of the latest projection articles and more detailed projection results, appears in Employment Projections for 1995: Data and Methods, Bulletin 2253 (Bureau of Labor Statistics, 1986).

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